Do Tipped Employees Get Paid Overtime?

Oct 13, 2017
By Peter Friedmann

Yes. A tipped employee who works more than 40 hours during a workweek must receive overtime pay. The way this is calculated gets a little complicated, leaving plenty of room for an employer to try to deny overtime pay to a person who accepts tips as part of their cash compensation.

Recognizing that an employer is violating federal and state overtime laws requires knowing 1) who meets the legal definition for “tipped employee” 2) what the minimum wage for tipped employees is 3) how overtime pay gets calculated and 4) how relevant statutes allow employers to treat tips when calculating a tipped employee’s hourly wage for purposes of determining the overtime rate. The Columbus Ohio overtime lawyers with The Friedmann Firm will provide basic explanations here. If you have questions or concerns about unpaid overtime, we welcome requests for free consultations on our website or by phone.

Who is a “tipped employee”?

The Fair Labor Standards Act (FLSA), the federal laws that apply to minimum wage and overtime pay, specify that anyone who receives more than $30.00 in tips during a month can be considered a tipped employee for the purposes of minimum wage and overtime pay compliance. Occupations that the U.S. Department of Labor lists as examples of tipped employees include:

  • Waiter/Server
  • Waitress/Server
  • Bellhop
  • Front desk/counter employee who serves customers (example: fast food counter)
  • Busser
  • Bartender

Who is not considered a tipped employee?

Even though they may receive payments over and above their wages, the following people cannot claim tipped employee status for legal or tax purposes:

  • Babysitters
  • Nannies
  • Live-in caregivers
  • Family members who work in businesses owned by their families
  • Youth camp staff and counselors
  • Outside salespeople who make commission on sales

These lists are non-exhaustive and there are many other examples of tipped and non-tipped employees.

What is the minimum wage for tipped employees in Ohio?

During 2017, restaurants, bars, hotels and other businesses that employed tipped employees in Ohio had to pay those tipped employees at least $4.08/hour.  Since the state’s general minimum wage was $8.15 per hour, however, employers had a legal obligation to show that their tipped employees earned at least $8.15/hour once their hourly wage and tips were combined.  Federal minimum wage is only $7.25 so Ohio’s employees are entitled to Ohio’s higher minimum wage.  In cases where employees are subject to both the federal and state minimum wage, the employee receives the higher of the two.

Pursuant to the Ohio Constitution, Ohio’s businesses must keep certain payroll records for hourly employees.  Records an employer must keep include each tipped employee’s rate of pay, gross and net pay per pay period and hours worked each day and workweek.  Failing to keep this information and produce it upon request could constitute a violation of Ohio law.

What is the overtime pay for tipped employees in Ohio?

The mandatory overtime rate for tipped employees is the same as for employees who are not considered “tipped employees.”  Even if your employer pays you $4.08 per hour and uses a tip credit to ensure you are earning minimum wage for each hour worked, the employer still must pay you overtime for all hours worked over 40 hours in a workweek based on the FULL minimum wage you are receiving, which should be $8.15 per hour in Ohio.  Therefore, all hours worked over 40 in a workweek should be paid at “time and one-half” of your hourly rate.  If you are earning $8.15 per hour, your overtime rate should be $12.225 ($12.23) per hour.

Can an employer take tips away from an employee?

Typically no.  The FLSA dictates that “tips are the property of the employee.”  One exception is if employees participate in a valid “tip pool.”

A “tip pool” is a valid way that restaurants and similar establishments can divide tips amongst employees.  For example, all waitresses and waiters may put their tips in one large tip pool and split them equally at the end of the night.  Employers can require employees to participate in a valid tip pool but there are certain requirements.  Most importantly, the tip pool cannot contain non-tipped employees.  This means tips earned by servers, bartenders or other tipped employees cannot be split with employees who do not receive tips, like management.

What are some examples of improper tip pools?

  • A bar owner claims he/she is entitled to tips made by employees and shares in the tip pool. Even if that person is actually working at the time he/she claims they are entitled to tips, it is improper for the owner or owners to share in the tip pool.
  • The restaurant/bar itself keeps a percentage of the tips for an administrative, processing, handling or other type of fee. The only deduction that is permissible is a fee of typically less than 3% for credit card processing fees.  The restaurant/bar can only keep the amount that is actually charged for credit card processing fees- not a penny more.
  • Management cannot share in a tip pool.
  • Non-tipped employees cannot share in a tip pool.

Questions about what this means or how it is applied to your workplace?  Give us a call for a free consultation.  One of our Columbus employment lawyer can help you with a situation involving potential tip theft.

How is an employer allowed to treat tips when calculating minimum wage and overtime?

In Ohio, an employer can use something called a “tip credit” to make up for the amount of minimum wage it is not paying an employee.  Keep in mind, you must be paid at least $4.08 per hour as a “tipped employee.”  You must then make another $4.08 per hour in tips, in order to bring you to a total of $8.15 per hour- Ohio’s minimum wage.  The $4.08 per hour that is comprised of tips is called the “tip credit,” and documenting it is one of the records an employer must keep to prove compliance with minimum wage laws.  Essentially, the employer is allowed to pay you a combination of wages and tips, as long as you are paid $4.08 per hour (50% of the minimum wage in Ohio) and the tips bring you to at least $8.15 per hour.

We understand that the laws related to minimum wage, overtime and tipped employees are complicated.  We are happy to answer any questions you may have and analyze your situation to ensure you are being paid correctly.  To arrange a confidential, no-cost discussion with a Columbus, Ohio, unpaid overtime lawyer, call the Friedmann Firm at 614.610.9755. You can also schedule an appointment online.